A tool that is very useful and interesting for a person who starts in the world of online business and wants to obtain maximum profitability is dropshipping. This term can be unknown to many, but it is about selling physical products such as clothing, technology, perfumes, among others, with a very important advantage and is that the store owner does not need to physically have the stock, which means that it doesn’t need to buy the product, store it and send it to the customer –in this case, the dropshipping business buys product from a wholesale supplier which is responsible for sending the product directly to the customer in question.
With this method, the store owner or retailer takes an intermediary role in said sale. In spite of he does not have contact with the product, it is sent to its customers with its own brand, which is an excellent way to get started in online commerce.
Advantages of a dropshipping business model
Little initial investment: The biggest advantage of dropshipping is probably that you can launch an online commerce store without the need to invest thousands of dollars in inventory in advance. Traditionally, retailers have had to commit large amounts of capital to purchase inventory. This is a great benefit for all those small businesses and brands that are just starting out.
Easy start: Managing an electronic commerce business is much easier when you do not have to take care of storing the physical products. With dropshipping, you do not need to worry about the following:
- Paying the expenses of a deposit.
- Packing and sending the orders.
- Controlling the inventory for accounting purposes.
- Dealing with returns and internal shipments.
- Ordering products continuously and managing inventory levels.
Reduction of fixed expenses: Due to the fact that the purchases of inventory and deposit management are not handled, the fixed costs are quite low compared to those of a traditional business.
Wide selection of products: As you do not need to buy the products in advance to sell, you can offer a wide range of products to your potential customers. If the suppliers have it in existence, you can include it in your list of sale on your website without additional cost.
Great scalability: With a traditional business, if you receive three times more orders than usual you will usually have to triple the work. By having dropshipping providers, most of the processing work for additional orders will be done by suppliers, allowing you to expand with lower costs and less work. The growth in sales will always involve additional work, especially in terms of customer service, but businesses that use dropshipping are easily scalable in relation to traditional electronic commerce businesses.
All these benefits make dropshipping a very attractive model for both beginners and established traders. However, it is important to note that the model has certain complexities and problems included that you must know how to handle, such as double shipping costs which occurs when working with different suppliers and the customer places an order for several products available to different suppliers. In addition, any error of a supplier can affect the reputation of the online store, and also the fact of being an easy model to start has great competition which forces to lower the profit margin.
Taking into account the above, it is clear that the dropshipping service is neither perfect nor a stress-free way to build a successful business. The good news is that with detailed planning and consideration, these problems can be solved and thus ensure that your dropshipping business grows and is profitable.
Steps to follow to start a successful dropshipping online store
1) Study the profitability of the product you want to sell. That is to say, you should think about products that meet the following characteristics:
- Not saturated.
- That does not have much competition.
- That covers a need.
- That it can be positioned quickly on the internet.
2) Search for suppliers. Before looking for suppliers, it is vital to know how to differentiate legitimate wholesale suppliers from retail stores that are considered wholesale suppliers. A true wholesaler buys directly from the manufacturer and, generally, can offer you a much better price.
One of the most effective strategies for find legitimate wholesale suppliers is to call the manufacturer of the products you want to sell and ask for a list of their wholesale distributors. Afterwards, you can contact those wholesalers to see if they offer dropshipping and ask them about the process of opening an account. In addition, there are different online platforms to get suppliers, such as Aliexpress, Amazon, among others.
In relation to the negotiation with the suppliers, it is very important because represents the conditions that will govern the operation of the business, of the prices of the products and the delivery of the orders. Within your online store you must have reasonable sale prices of the products, therefore, the purchase price to the supplier must be the minimum possible to have a higher margin of profit. As for the delivery times to be negotiated, they must be as short as possible so that customers have their orders in the shortest time. It is advisable to have more than one provider.
3) Create an online store. If you lack the technical knowledge to create an online store, you can to turn to an online store service such as Shopify that has everything you need so you only have to dedicate yourself to sell. It is necessary to highlight that to overcome the competition, you must create a powerful brand with which your customers feel identified and publicize your products through a blog, web page or a YouTube channel in order to position yourself among the search engines and therefore obtain higher sales.
4) Receipt of the order and shipment of the products. The dropshipper provider receives the order made by the customer to the online store and is responsible for making the delivery of the product purchased, within the agreed period and with the distinctive or trademark of the store.